Google, Verizon Outline Net Neutrality Compromise

Web and telecom giant come forward with their legislative proposal to solve the broadband dilemma that has taken center stage at the FCC.

After weeks of rumors and back-room intrigue, Google and Verizon have come forward with the details of a joint policy proposal outlining a compromise that would provide for federal oversight of Internet traffic while avoiding some of the more stringent regulatory restrictions that have come under fire from broadband providers.

Though generally on opposing sides of the net neutrality debate, Google (NASDAQ: GOOG) and Verizon (NASDAQ: VZ) have made occasional showings of solidarity since the Federal Communications Commission opened a proceeding to codify open-Internet and nondiscrimination requirements last October.

The talks have intensified in recent weeks as the FCC has been holding its own set of closed-door talks with industry stakeholders, including Google and Verizon, in an effort to hammer out a compromise on how the commission should proceed with its open-Internet agenda. Amid reports that Google and Verizon had reached a deal in their side talks, the FCC announced that it had called of its own negotiations.

Now, Google and Verizon have made their agreement public, outlining a proposal for targeted legislation that would give the FCC the authority to enforce some of its net neutrality goals, while setting significant limits to shield broadband providers -- particularly in the wireless space -- from some of the more objectionable regulations.

"Ultimately, we think this proposal provides the certainty that allows both Web startups to bring their novel ideas to users, and broadband providers to invest in their networks," Google Public Policy Director Alan Davidson and Tom Tauke, Verizon's executive vice president of public affairs, policy and communications, wrote in a joint blog post.

The idea that they are pitching to lawmakers proposes legislation to give the FCC the authority to enforce its existing set of open-Internet principles for wireline Internet service. Those principles, among other things, stipulate that consumers should have the ability to connect to lawful content of their choosing.

That policy statement was the basis for a FCC order in 2008 rebuking Comcast for secretly blocking legal peer-to-peer traffic, an action overturned by a federal appeals court in April.

In the interim, a vigorous debate over the FCC's authority in the Internet sector has raged in Washington, with Chairman Julius Genachowski announcing in May his intention to reclassify broadband as a so-called Title II telecommunications service, a legal designation that would put the agency on firmer footing in matters such as net neutrality as well as many policy recommendations included in the national broadband plan.

The response from Capitol Hill has been swift and thunderous, as lawmakers of both parties have urged Genachowski to back away from the reclassification approach and defer to Congress on the matter. The FCC's stakeholder negotiations that collapsed last week were aimed at producing a compromise that could serve as a blueprint for a bill.

Now, Google and Verizon are calling on lawmakers to draft legislation that would give the FCC narrow but explicit enforcement authority to impose both its open-Internet principles and two additional rules.

One would explicitly bar the blocking or discrimination against specific types of lawful content, but, significantly, would only apply to wireline providers.

Genachowski had proposed a nondiscrimination requirement that would also extend to wireless carriers, albeit with some leniency. That proposal sparked heated opposition from CTIA, the principle trade organization representing the wireless industry, as well as its largest members, including AT&T and Verizon Wireless, a jointly owned subsidiary of Verizon Communications and Vodafone.

Eliminates possibility of pay for play

The Google-Verizon proposal also calls for an enforceable transparency rule that would apply to both wireline and wireless providers, requiring them to clearly present their network management policies to consumers. The FCC would handle enforcement on a case-by-case basis, with a penalty cap of $2 million for violation of the nondiscrimination or transparency rules.

The nondiscrimination rule would take some steps toward prohibiting what net neutrality proponents describe as a nightmare scenario, a pay-for-play Internet marketplace where ISPs could lean on the largest Web companies, such as Google or Amazon, for payment in exchange for speedy delivery of their traffic, effectively choking off the prospects for innovative young startups that couldn't afford to pay the freight.

"Importantly, this new nondiscrimination principle includes a presumption against prioritization of Internet traffic -- including paid prioritization," Davidson and Tauke said. "So, in addition to not blocking or degrading of Internet content and applications, wireline broadband providers also could not favor particular Internet traffic over other traffic."

At the same time, the proposal leaves room for ISPs to develop and market "additional, differentiated online services" that would operate under a different set of rules. The companies suggest examples such as health IT or smart-grid applications, which would exist outside the standard nondiscrimination rule that would govern regular Web traffic.

The idea of carving out exemptions for so-called managed services has raised concern among net neutrality advocates, who have warned that greedy ISPs could simply apply that designation to premium video or other content at their whim in an effort to open new revenue lines.

The legislative proposal suggests that "such other services would have to be distinguishable in scope and purpose from broadband Internet access service, but could make use of or access Internet content, applications or services and could include traffic prioritization."